The Wildebeest Theory

The Wildebeest Theory

Recently, at a mortgage conference in Las Vegas, there were several discussions about small and medium-sized entities inability, or lack of desire, to remain current with the necessary compliance requirements. In short, many small to mid-size mini correspondents and mortgage brokers are not compliant and don’t seem to be concerned about it.

It was part of this conversation that the Wildebeest Theory was proposed as being a significant part of the reason for this phenomenon. Wildebeests are a plains animal that travels in herds using the age old safety in numbers survival plan protecting all of animals, except the diseased and aged. Vulnerable animals are preyed on by predators and the rest of the herd remains safe. Of course, as we know, every individual in the herd sooner or later ages and/or gets sick.

This seems to be the premise with many small and mid-size mortgage operations. They think as a collective part of the industry they are just too small to be noticed. As such, they are either ignorant or complacent about their compliance program.

Unfortunately, the Consumer Financial Protection Bureau (CFPB) has announced they have these mortgage operations in their sights and, having worked their way through the larger entities, are coming after them. In particular, they are targeting mortgage brokers and mini correspondent lenders, which have been referred to by many as “rogue cowboys” who have little to no professional commitment to the industry and are still running under a “profit first” mantra versus a compliance first mandate. Also, these operations seem to expect their lenders to make sure all their files are compliant. The CFPB has stated publically many times that mortgage brokers, mini correspondents and the like will be treated as if they were the lender when it comes to compliance.

Notice has been served, the clock is ticking and the question is: how committed are you to your company’s future? It is time to take a long look at the compliance piece of your company and decide whether you want to remain healthy and viable or fall away like the decrepit Wildebeest. It is not a question of if you will by audited by the CFPB, but rather when will it happen. There is simply no longer any room for non-compliant entities in the industry. Get compliant and secure your future in the industry.